Sell the rumour, buy the fact? How to play UK losing AAA

Moody's decision to strip the UK of its AAA credit rating on Friday night will have a further negative impact on sterling and could hit gilts too, analysts have suggested.

Sterling fell to a two year low against the dollar on Friday evening after the announcement, dropping through $1.52, and that weakness continued in Asian trading this morning as the pound briefly moved below $1.51. Few are calling for a sterling rebound, however, with further weakness over the short- to medium-term being widely predicted. Opinion on gilts is more divided; some suggest the likelihood of further quantitative easing from the Bank of England will continue to put a floor under prices, but others, like Nomura's Philip Rush, suggest sterling weakness could have a knock-on ef...